Question

Answer in one sentence only :

What is meaning of closing entry?

Answer 1

At the end of the accounting period, the Trading and Profit and Loss A/c has to be prepared to ascertain the net profit or loss. Thus, the nominal accounts are closed by transferring their balances to Trading and Profit and Loss A/c. These entries are termed as closing entries. For example, the closing entry for Wages A/c will be:

Trading A/c		Dr.
	To Wages A/c